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Macau’s amazing, incredible, soaring property prices

September 25, 2017

Macau's amazing property boom since 2009 has quintupled property values. There was a decline in 2015-2016, but now prices are taking off again, amidst massive infrastructure investments which will transform Macau's connections to China and Hong Kong.

During the year to Q2 2017, the average transaction price of residential units in Macau surged 32.8% to MOP 104,263 (US$12,958) per square metre (sq. m), according to the Statistics and Census Service (DSEC).The double-digit increase was in sharp contrast with last year's 17.6% annual decline and the biggest y-o-y rise since Q3 2014. When adjusted for inflation, prices rose by 31.5%.

In Macau Peninsula, the historic center of Macau, the average transaction price of residential properties rose 18.5% (17.4% in real terms) y-o-y in Q2 2017. NATAP registered the biggest house price increase in the island of 27.9% during the year to Q2 2017, followed by ZAPE (24.2%), NAPE e Aterros da Baía da Praia Grande (23.6%), and Horta e Costa e OuvidorArriaga (6%).

In Taipa, where there are many hotels, casinos, and shopping malls and which is home to the Macau Jockey Club racecourse, residential property prices surged 49.3% (47.9% in real terms) during the year to Q2 2017. House prices rose by 54.1% in Baixa da Taipa and by 47% in Jardins do Oceano e TaipaPequena.

In Coloane, home to two of Macau's best beaches - Cheoc Van and HacSa, residential property prices increased 29.6% (28.4% in real terms) y-o-y in Q2 2017.

Coloane has the most expensive housing in Macau, with an average transaction price of MOP 132,696 (US$16,491) per sq. m. in Q2 2017. It was followed by Baixa da Taipa, with an average price of MOP 123,678 (US$15,370) per sq. m; Jardins do Oceano e TaipaPequena, at MOP 116,498 (US$14,478) per sq. m; and NATAP, at MOP 111,659 (US$13,877) per sq. m.

Rentsof high-end residential properties continue to rise, albeit at a much slower pace. At The Waterside, the average monthly rent increased by 1.5% to US$2.27 per square foot in Q2 2017 from the previous quarter, according to MPO Fund.

Yet residential construction activity is mixed. During the first seven months of 2017, residential building permits issued fell by 14% from the same period last year while completions increased 13.5 times over the same period.

"As sentiment continues to improve, we believe that the recent increase in housing demand among local residents will be sustained," said Macau Property Opportunities Fund (MPO Fund). "Macau's market fundaments remain healthy, with high and stable median income, rising residents' deposits, low unemployment, a growing population and attractive levels of residential affordability."

However, "Uncertainties exist, including the possibility of another round of Federal Reserve interest rate increases, China's attempts to restrain capital outflows, and reactions to global political changes. The imposition of new LTV ceilings and mortgage loan caps may also prompt investors to adopt a more conservative approach to property purchases."

Macau's economy expanded by 11.5% in Q2 2017 from a year earlier, higher than the previous quarter's 10.3% growth, thanks to strong private consumption and an increase in exports of services, according to the DSEC.

Transaction costs can be high in Macau

Total transaction costs can rise up to 33.65% of the property value depending on the circumstances. If the property was acquired on or after 14 July 2011 and resold within two years of acquisition, the seller is liable to pay Special Stamp Duty (SSD) from 10% to 20% of the property value.

Macau’s economic growth is accelerating

Macau’s economy expanded by 11.5% in Q2 2017 from a year earlier, higher than the previous quarter’s 10.3% growth, thanks to strong private consumption and an increase in exports of services, according to the DSEC. During the first half of this year, the economy grew by a total of 10.9% from the same period last year.

During the first half of 2017:

Exports of services surged 16% y-o-y, in which exports of gaming services and other tourism services increased by 15% and 21.5%, respectively

Exports of goods rose by 5.5%

Imports of goods rose by 3.8% while imports of services surged 13.8%

Private consumption increased 2.5%

Government expenditures increased slightly by 0.9%

Investments increased 1.8%

The economy contracted by 2.1% in 2016, after shrinking by a whopping of 21.5% in 2015 and by 1.2% in 2014, after Macau’s main industry - gaming activities - took a major hit from China’s anti-corruption campaign. Macau’s economy grew by almost 17% per year from 2010 to 2013.

In 2016, total receipts of the 10 gaming enterprises amounted to MOP229 billion (US$28.46 billion), down by 1.8% from a year earlier, according to the Statistics and Census Service (DSEC). However this was a sharp improvement from 2015’s 34.3% decline.

Tourist arrivals are surging. In July 2017, visitors on package tours increased 22.8% to 819,000 people from the same period last year, according to the DSEC. During the first seven months of 2017, package tour visitors were up by 12.4% to 4,596,000 people over the same period last year.

Macau’s economy is expected to expand by an average of 7.8% per year in 2017 and 2018, according to the Economist Intelligence Unit.

In July 2017, overall inflation stood at 1%, down from 1.1% in the previous month and 2.1% in the same period last year.

The general unemployment rate was 2% during the three months ending July 2017, down from 3.1% in the same period last year, according to DSEC. There were about 8,000 unemployed persons in this tiny special administrative region of China.